U.S. corporate acquisitions: depreciation and amortization issues

In the usual purchase of a business, various intangibles change hands, such as customer lists, supply sources, patents, trademarks, license rights and goodwill. For accounting purposes each such asset gets valued at its fair market value and is then amortized based on its estimated economic useful life except for goodwill. Effective in 2001, amortization of goodwill will not be required annually; instead an annual valuation review of purchased goodwill will be required with adjustment to market value mandated.

For tax purposes, similar rules apply except that customer lists, supply sources and goodwill are “lumped” into one category that is amortized over 15 years. In France and other countries amortization of “market share” is not required whereas it is required in the U.S.

DISCLAIMER

The information provided here and on the other pages linked hereto is intended for educational purposes only, and is not legal advice. Particular situations require particular analyses that can only be provided by legal and/or accounting professionals who specialize in the relevant fields and who know all the details of a situation. Also, a presentation such as this does not establish the attorney and/or CPA-client relationship that is necessary in any rendering of legal or other professional advice. Finally, one should be aware that the law is a chameleon-like beast that changes its colors frequently, and what holds good today may be reversed by tomorrow. The comments herein should then be read in that light.

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Depreciation and amortization issues